This week, the leader of an Ashburn biotech start-up asks for advice on how to convert her diagnostic service into software that can be sold as a service. –Dan Beyers

The entrepreneur

Scientist Crystal Icenhour earned her PhD as a medical researcher, but bucked the trend and didn’t want to go into academia. While trying to figure out her next move, a friend steered her to the University of Virginia, where a professor there was looking for someone to run the research arm of a company he started. That’s how Icenhour’s first “real” job became co-founding and running a biotech start-up in Charlottesville, Va. that fought intestinal parasites.

When that company was acquired in 2013, Icenhour was left looking for her next move. She knew she loved running companies. So when another professor at George Washington University was looking for someone to head up the company he and his collaborators were trying to start, Icenhour jumped at the opportunity. She came on as the founding chief executive of Ashburn, Va.-based Aperiomics.

“With my first company, I was the innovator and I spent a lot of time on the science,” says Icenhour. “Once of the big lessons learned was that was too much and you can’t be the chief executive and the chief technologist in a company. I was never able to achieve as much as I wanted to because there was never enough time and resources. I decided with this company I was going to focus on the business side – a better use of my skillset.”

The pitch

Icenhour, CEO of Aperiomics

“Aperiomics is an infectious disease company at the intersection of high tech and biotech. We use an IT infrastructure to solve biological problems. Our ultimate goal is to be able to identify every pathogen from any sample with a single test. Right now, we can identify more than 1,200 pathogens – bacteria, viruses, parasites and fungi — in a single test.

“We offer the technology as a service right now. Our clients send us a sample – plant, animal, human tissue, blood, stool – any type of a sample that has microorganisms or pathogens in it. We extract DNA from the sample and do whole genome shotgun sequencing, which effectively creates a genetic blueprint of everything in the sample. Our technology is the data analytics that sort through the very large, complex dataset and make meaning of it. What we report back is a list of all of the pathogens that we find in the sample. We’re a diagnostics company, but effectively we’re a software company because of our data analytics.

“We have yet to hire sales or marketing people in our two years in business. Despite that, we have 10 clients, ranging from clinical clients to agriculture clients. We are fundraising right now so we can ramp up and start expanding our business. Our ultimate goal is to sell our software directly to customers, so they can perform their own data analysis.

“As we think ahead, how do we adapt our sales process to sell a software product versus a biotech diagnostic service? What sort of sales structure should we build around what will eventually be a software-as-a-service company?

The advice

Elana Fine, managing director of the Dingman Center for Entrepreneurship at the University of Maryland’s Robert H. Smith School of Business

“While now, your user, payer and decision maker might all be the same person, as you scale and start selling a software package, the sales process will likely increase in complexity. Anticipate longer sales processes that include vetting by a chief information officer or an IT department.

“You currently have a much more extensive and costly relationship with your customers because you’re providing an end-to-end service, so I can understand why you’d want to transition to a higher margin business model. However, your platform needs to be easy to use and run flawlessly before you switch models. Customers trust you to run a process and likely don’t question the results because they see you as a diagnostic services company. Once customers invest in a software license or subscription, they will not be tolerant of any service interruption, especially if their ability to serve their clients or patients rests on your platform.

“As we tell a lot of companies, continue to learn from your earliest customers and invest in those relationships to really perfect the software. Expand your sales team to include industry experts who will nurture long customer relationships and will have patience for longer sales cycle.

“Right now, you likely have a high-touch, lower-margin model with high customer satisfaction. As you transition to sell your solution as software, you’ll move toward a low-touch, higher-margin model and it is critical that the product is accurate and reliable to maintain high customer satisfaction. If you can ensure that, sales and marketing will come easily with referrals from happy customers.”

The reaction

Icenhour

“We are often challenged on our lower margins, but it is challenging to explain a business model that begins as a service and then evolves to a product. We have begun the process of working with our early adopters, calling upon them for invaluable guidance and advice for improving our service. This will create a strong foundation on which we will build our new service offering.”